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2019 (10) TMI 351
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....10/- claimed by the appellant as revenue/ period expenditure. 2. On the facts and circumstance of the case , the Ld. CIT (A) erred in law and on facts in confirming disallowance of Rs. 1,85,95,917/- made by assessing officer after having held that all the indirect expenditure are allowable as period cost. 3. On the facts and circumstances of the case , the Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 22,02,640/- on account of disallowance of processing fee of loan taken by the appellant by holding that the same should be capitalized to the project coast as work in progress. 4. On the facts and circumstances of the case , the Ld. CIT (A) has erred in law and on facts in disallowing the commission expenses of Rs. 1,63,90,177/- by holding the same as project specific expenses. 5. On the facts and circumstances of the case, the Ltd. C.I.T. (A) has erred in law and on facts in confirming disallowance of Rs. 22,02,640/-on account of processing fee and Rs. 1,63,90,177/- on account of commission after having upheld the legal position that the indirect expenses are period cost and therefore allowable in the year in which the s....
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....as on account of double disclosure made by the Assessee of Rs. 9 crores. 5. During the course of assessment proceedings it was noted that Assessee recognizes revenue on percentage completion basis. The ld Assessing Officer noted that Assessee has shown income from the project of Rs. 127007573/- and other income of Rs. 102140867/-. The Assessee has claimed expenditure of Rs. 21.23 crores which includes other expenditure, cost of revenue, cost of land, finance charges and sales and marketing expenditure. The ld Assessing Officer noted that Assessee has shown sales of Rs. 127007573/- and cost of sales is Rs. 101841337/-. Therefore, according to ld Assessing Officer no other expenditure should be allowed against this income as further deduction. According to ld Assessing Officer the Assessee has claimed expenditure of Rs. 11.05 crores against other income of Rs. 10.21 crores. It was further noted that amount of miscellaneous income of Rs. 10.21 crores includes Rs. 9 crore surrendered during the search. Thus according to him the assessee has expenditure of Rs. 11.05 crores to negate the surrendered income. Thus, Assessee was questioned about the allowability of that expenditure. T....
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....his conduct of the assessee shows that it is not interested in prosecuting this appeal. On the last two dates, neither the adjournment application is the time of hearing or later on. Keeping the appeal is pending waiting for the assessee to respond at his sweet will is a great injustice done to the other party. Therefore, we are forced to proceed these matters to decide on the facts of the case and information available on record. 8. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that that learned CIT - A has deleted the disallowance of INR 7 7072993 merely based on the guidelines of IC a holding that indirect expenses being. Cost are allowable expenditure and there could be no justification for disallowing the claim of such expenses especially when the assessing officer himself has accepted and assessed the revenue booked by the appellant during the year under consideration stop she submitted that the total project cost is required to be capitalized as work in progress. Thus, she argued that the order of the learned assessing officer may be restored. 9. We have carefully considered the rival contention an....
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....s. 10,21,40,867/- and the same should not be allowed. The AO has further observed that the assessee had shown misc. income of Rs. 9,01,64,093/- ( included under the head "other income of Rs. 10,21,40,867/-) which includes Rs. 9 crores surrendered during the course of search operation and as such assessee has claimed the above expenditure of Rs. 11,05,26,147/- to negate the surrendered income. The AO has also noted that the project expenses of Rs. 2,09,25,355/- have been added to the inventory by the assessee. The assessee had furnished detailed replies during the course of asstt proceedings in support of method of accounting adopted by it and the expenses claimed. After considering the replies submitted by the appellant, AO has made a net addition of Rs. 9,56,65,810/- ( Rs. 11,26,79,720 - Rs. 1,70,13,910/-) on account of excess claim of indirect expenses primarily and, inter-alia, for the following reasons given in asstt order: (i) There is change in accounting policy followed by assessee as it had not been following the percentage completion method subject to 30% condition of completion compared to total cost of project. (ii) There are various projects like Bhiwa....
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.... mark percentage fixed by the management of appellant company for recognizing the revenue as per AS7. In the preceding year i.e. year ending 31-3-2007, the appellant had mentioned that revenue would be recognized subject to actual cost being 30% or more of the projected cost whereas in the present year, the appellant has decided that the bench mark percentage should be 10% and since in the present year the actual cost achieved is 10.22% of the projected cost, the appellant has been duly disclosed by the appellant in its notes to accounts recognized the revenue. The above change in accounting policy forming parts of financial statement. The Id. AR in his written submission has drawn my attention to the provisions of section AS-1 of ICAI which permit the change in accounting policy. The following judicial decisions in this regard referred to by the AR duly support the case of the appellant. a. Indian Oiltanking Ltd. V/s TTO, Mumbai 120 TTJ 61 (Mum-Trib) b. Dy. CIT V/s Conwood Agencies Pvt. Ltd. 2 SOT 573 (Mum) c. MKB (Asia) (P) Ltd. V/s CIT 167 Taxman 256 (Gau) d. DCIT V/s IT C Hotels Ltd. 82 TTJ 652 (Ban-Trib) On a perusal of facts of pre....
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....re allowable as period cost and there is on deviation in this respect as compared to the accounting practice followed in the earlier years. In fact, the deviation was there in the year ending 31-3-2007 by way of specific disclosure made by the appellant The Id. AR in his written submissions has also relied on the provisions of AS7 and has successfully argued that the indirect and administrative cost that are not attributable or allocable to a particular contract are to be excluded from contract cost. I am also in agreement with the submissions of the counsel that in any business which has commenced its operation, all revenue nature expenditure is to be allowed as such after the commencement of the business. It is also not disputed by the AO that the contract cost relating to direct cost of construction including the cost of land has been claimed proportionate to the revenue recognized. The Id. AR has also in his written submissions given a description of various heads of indirect expenditure being Establishment expenses i. e. personal cost relating to administrative employees of the appellant, Finance Charges: being the interest and bank charges, Sales and Marketing expenses: being....
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.... Then there are expenses on account of processing fee and charges of the various loans availed by the company. In this regard we wish to clarify that the break-up of the processing fee and loan processing charges is as under: SI Project Processing Fee (In') Loan Processing Charges In' i. Bhiwadi 1,68,000 5,61,800 ii. Palwal Nil Nil iii. Corporate Park 22,02,640 Nil Total 23,70,640 5,61,800 The major expense of Rs. 22.02 Lacs in respect of processing fee is the processing fee of the loan from M/s India Bulls. The remaining are the routine expenses of the loan of the Bhiwadi Project. Other than the above there are routine expenses on account of interest paid to banks and financial institutions for the general loans availed by the Appellant Company. Also there are routine expenses on account of interest on car loan and bank charges which are not relatable to a specific project. 3. Regarding sales and marketing expenses, these are the expenses for the promotion of the business of the Appellant Company as a whole and the advertisements in various "Medias‟ and also ....
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....2,02,640/- being the processing fee of the loan availed by the appellant from M/s. India Bulls for the project at corporate part. The appellant has itself stated in his written submissions that the interest expenditure pertaining to above loan being directly recognized with the project has been capitalized under work in progress. Therefore, there is no justification to claim the processing fee of this loan as an indirect expenditure as per the policy followed by the appellant itself. Further, although sales and marketing expenses are allowable indirect expenditures being a period cost, however, the commission expenses incurred on the broker for booking the flats in the various properties is according to me a directly identifiable expense of the specific project for which commission is paid to the dealer. The relevant expenditure in respect of appellant‟s project located at Palwal and Corporate Park (the projects for which revenue is yet to be recognized) is Rs. 1,63,90,177/- and the same cannot be equated with other indirect expenditure and is accordingly liable to be disallowed. Although the AO has mentioned that the project wise expenditure details is not being mai....
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....ssessee contesting the confirmation of the disallowance of INR 1 8592817/- is dismissed. Accordingly, ground numbers 1 - 5 of the appeal are dismissed and findings of the learned CIT - AR confirmed. 11. Now we come to ground number 6 of the appeal against not treating the surrender of INR 90,000,000 is voluntary in treating the same as income from undisclosed sources. This ground is premature, as it does not have any consequence on the determination of the total income of the assessee. The learned CIT - A has correctly decided this ground as per para number 5.2 of his order. Thus the finding of the learned CIT - A is confirmed on the ground number 6 of the appeal of the assessee is dismissed. 12. Accordingly ITA number 1644/del/2011 filed by the assessee is dismissed. 13. CO number 165/del/2011 filed by the assessee for assessment year 2008 - 09 in ITA number 1972/del/2011 filed by the learned AO Challenges on the similar ground additions confirmed by the learned CIT - A. As we have dismissed the appeal of the assessee on the similar grounds, the cross objection filed by the assessee is also dismissed for the reasons given while deciding the appeal of the assessee in....
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....s limited. Therefore, on this issue revenue has filed an appeal in ITA number 1971/del/2011. 17. The second issue involved in this appeal is the claim of deduction u/s 80 IB of the income tax act. During the year under consideration the assessee has shown income from business and profession of INR 8 4755266/- and income from other sources at INR 1 929819/-. The assessee has claimed deduction u/s 80 IB of the income tax act on account of the activity of the assessee other than infrastructure development. During the course of assessment proceedings, it was noted that Assessee Company has built to size of flats that is 1164 ft² and 1446 ft² respectively. The assessee company is claiming that it is not exceeding 1500 ft² is area of the residential unit. Claim of the assessee was rejected by the learned assessing officer holding that the site of the project of the assessee is situated within 25 km from municipal limits of Delhi. Therefore the claim of deduction u/s 80 IB amounting to INR 8 6685089/- is not allowable. The assessee preferred an appeal before the learned CIT - A. The learned CIT - A held that the residential unit must have a maximum built up area of 10....
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....l units having built-up area of less than 1000 sq. 4. The Appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off. 5. It is prayed that the order of the Commissioner of Income- tax(Appeals) be set-aside and that of the A.O. be restored." 19. The assessee has raised the following grounds of appeal in Cross Objection No. 164/Del/2011 for the Assessment Year 2008-09:- "1. That on the facts and circumstances of the case, the Ld. C.I.T (A) has rightly allowed costs as period costs to be charged to the profit and loss account for the period in which these are incurred. 2. That, on the facts and circumstances of the case, Ld. C.I.T.(A) has rightly allowed indirect expense as period expenses as the revenue arising to the appellant from Real Estate Project is being recognized as per percentage of completion method as prescribed under the Accounting Standard -7 of the Institute of Chartered Accountants of India (ICAI ). 3. That on the facts and circumstance of the case, the Ld. C.I.T. (A) has erred in disallowing a part of the deduction claimed amounting to Rs. 8,66,85,089/-. 4. Th....
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....ecided by us in this common order. We have already dismissed arguments of the revenue as well as the submissions of the assessee before lower authorities holding that there is no infirmity in the order of the learned CIT - A. Accordingly we also dismiss ground number 1 and 2 of the appeal of the assessing officer and ground number 1 and 3 of the cross objections of the assessee. 23. With respect to the claim of deduction u/s 80 IB of The Income Tax Act the learned CIT - A has held that assessee has placed contradicting facts about the size of the flats and therefore the learned CIT - A directed the learned assessing officer to verify the factual position regarding the area of residential unit having a built-up area of up to 1000 ft² and grant the benefit of proportionate deduction accordingly. According to us, the learned CIT - A has valid reason to direct the learned assessing officer to verify the fact. It is not in dispute that assessee has given written submission that built-up area of the residential unit is 1164 and 144 6 ft². This fact has been reproduced by the learned CIT - A in paragraph number 5.2 of his order. Thus, we do not find any infirmity in the direc....